City imposes safety fee on Ark Encounter tickets

The City of Williamstown has rejected the latest request by the Ark Encounter theme park to reduce the amount of a new “safety assessment fee.” Earlier this year, the city imposed a per-ticket charge of 50 cents to cover the cost of increased police and fire services.

Vernon

GoBucks89

"Fair share" is in the eyes of the beholder. Though any time its mentioned it typically means more than someone is paying now (without much of a justification beyond "more").

Laws on tax exempt entities paying real estate taxes vary by state. Not sure what the laws are in Kentucky but if tax exempt entities are not exempt from paying real estate taxes, the transfer shouldn't mean no real estate taxes are owed on the real property. Transfer price shouldn't impact the taxes owed. If it did, every couple would transfer their house from one party to the other for $10 to reduce their real estate tax liability to near zero.

Assuming there is no real estate tax liability because of the transfer to a tax exempt entity, the state/city/county could have addressed this issue when they approved the project. That they didn't should be on them rather than the project.

OhioStater

hambone

Saturday, July 22, 2017 8:14 AM

GoBucks, you know more about this than me, but is it typically legal to "sell" a property for so much less than it is clearly worth? I am thinking of an example where my father might sell me a $10 million house (which, it turns out, he does not have) for a dollar in order to avoid inheritance taxes.

CreditWh0re

Saturday, July 22, 2017 2:28 PM

"I'd guess that as long as the seller and buyer agree on a price, it's a deal", is true, but the issue is what the IRS and local Property Assessors think of it. If this were two individuals (not Corporations of Non-Profits) selling a parcel worth millions for $10, the IRS would immediately note the transfer as part sale part gift. Thus incurring Gift tax on the vast majority of the difference between imputed market value and sale price. All Dark Arts, but you don't want to be on the opposite side of the IRS examiner in that situation.

Given the involvement of one LLC and one Non-Profit, the issues get a bit murkier, but suffice to say that Tax Related issues come into play as it relates to cost basis and appraised values. I'm not sure exactly how that works.

bunky666

Saturday, July 22, 2017 8:57 PM

This all makes me sick. They started this off as a for profit theme park type attraction, and they were to receive tax incentives to assist in the building of the park.

Then they started to ask potential employees to sign a declaration of faith before they could work there. This was somehow excused because the employees were hired through the non-profit organization attached to the park. The state tried to revoke/pull the funding due to this discriminatory practice, and Ken Ham's minions sued the state successfully and got the funding back.

So taxpayers built a park based on a religion they don't all even follow, and now the park sells the property to a religious subsect of Ken Ham's that is non-profit and doesn't pay taxes. This despicable creature got his way to the tune of millions of dollars he didn't earn, and now he wants to further screw the people in this state? How is this even legal? It makes my blood boil.

GoBucks89

Sunday, July 23, 2017 8:56 AM

From the article linked above (and others I have seen online), looks like the city pulled the tax incentives on the basis that the Ark breached its agreement with the City with respect to the tax incentives by transferring the assets to a tax exempt entity. If that holds, rather than increasing its ticket prices by $0.50 each to help pay for security, the park will lose the sale tax rebates (I believe that is the tax incentive this deal involved). Seems like a bad trade if it holds.

Generally speaking the law doesn't require much of an exchange to create enforceable contracts. $10 is often reflected in contracts in addition to other promises. But as noted above, that doesn't mean there are no other consequences for a cheap sale. IRS will view cheap sales as gifts with gift tax rules applying. Real estate taxing agencies typically use sales price as a basis for tax valuations (though from what I have seen -- which is limited -- that's usually only if the sales price reflects an increase from the previous tax valuation--you have to fight for valuation decreases). But sales prices is relevant with willing buyers and willing sellers that are unrelated to each other. Arms length deals. Here we do not have that. So I wouldn't expect the $10 sales price to carry any weight with respect to real estate tax valuation.

I don't know the laws in Kentucky with respect to real estate taxes and tax exempt entities. I understand that some jurisdictions do not exempt tax exempt entities from real estate taxes. If Kentucky doesn't then the move wouldn't matter as the tax exempt entity would owe the real estate taxes (based on a fair market valuation of the property rather than the $10). But if it would be exempt from real estate taxes, looks like the City protected itself in its agreement with the Ark on the tax incentives.

There are also fraudulent transfer/conveyance laws which could come into play. You cannot cheat your creditors out of what you owe them by giving all of your assets away or selling them for huge discounts.

CreditWh0re

Sunday, July 23, 2017 2:43 PM

just for clarity:

The City is attempting to impose a NEW "safety tax", (essentially to cover the increase in costs for police/fire/etc for all the traffic to the Ark). The State is the entity who granted the [Sales] tax rebates which are now lost due to the transfer to the non-profit. Those would have essentially taken sales taxes paid by customers (sheep), and returned them to the Ark people, essentially State funding the operation. Not entirely unheard of by jurisdictions trying to lure businesses. It is unusual for an obvious religious endeavour, but that's why it was structured as a for-profit corporation. They successfully argued they were no different than a theme park moving in, who would receive a similar type of subsidy/incentive. The conversion to Non-Profit blows-up that schema. Someone really should have read the fine print. Although from a cached page on the website, it clearly indicates that they are a for profit corp and doing that availed themselves of tax breaks that would not have existed (re: lost) if they were a non-profit, so it seems like they did know.

Fraudulent Transfer/Conveyance issues usually only come into play if there is a bankruptcy or other loss to creditors, none of which has happened here (to date). It would be very interesting if there was a subsequent filing or stiffing of creditors (especially since Ham is shouting about what a success this thing is). I would relish being the rep for the Creditors Committee in that bankruptcy. (like need to seek medical attention after 4 hours type of glee).

CreditWh0re

Sunday, July 23, 2017 2:51 PM

and of course, why the Ark people couldn't have just added the "safety tax" to the "Taxes and Fees" line on the admission, I don't know. You go to Six Flags and the sign says $59.99 general admission (plus taxes), and you end up paying $6X.XX.

Granted, I understand any business fighting a tax that impacts their customers (see Mason Ohio and Anaheim California), but in this case, I would have been more accommodating to my host city. Then again, I'm not a religious nut job trying to scam donors and the general populous with my hokum.

LostKause

rollergator

Monday, July 24, 2017 9:46 AM

Whatever happened to "render unto Caesar"...?

Honestly, to me the problem isn't any specific religion, it's religious extremism - the idea that MINE is the one true religion, and those of you who believe *anything* else are blasphemers or worse, people who should convert or die. I tend to think that most Christians, Muslims, Jews, Buddhists, Sikhs, etc. want to live in peace. The rest, those who don't believe in their neighbors' right to leave peacefully in any religion, or with no religion at all....they need to go.

bunky666

Monday, July 24, 2017 1:02 PM

CreditWhore, and that's my problem with them trying to get out of any sort of tax. Either they're a business (a sorely misinformed and crazy business, but still a business) and they need to pay whatever taxes their business owes, or they're a non-profit religious organization and should have to pay back the state since they used taxes to fund a religious organization, which SO defies separation of church and state. Then they don't need to pay taxes after they give the people's money back because they're a religious organization. They can't have it both ways.

Great, now the vein in my head is twitching again. I don't even live there and I'm mad.